Although digital currencies have shown a substantial amount of progress over the past few years, recent volatility in the crypto world is giving skeptics more reason to stay doubtful.

While we have seen a consistent stream of innovation with new currencies, particularly in the past 18 months, there are now more than 800 of them that have been pronounced dead. This means that the coins have no value, trading at less than 1 cent. Most commonly the failure of these coins is due to their lack of integrity — being a scam or a joke — or because the product did not materialize. Many of the obsolete cryptocurrencies are listed on the website Dead Coins, which describes itself as a “strategic partnership to clean up crypto.” Coinopsy is another site that has reported dead coins. When considering reports from both sources, the number of dead projects accumulates into the thousands, with reasons ranging from true abandonment to outright scams.

CREATING NEW TOKENS: RISKY BY NATURE

A process called an initial coin offering (ICO) can create new digital tokens. In this process, a start-up can issue a new currency that is available for purchase by investors. While the investor does not obtain an equity stake in the company, the purchased cryptocurrency can be used on the product of the company. Since the coins are cheap while holding potential for substantial returns down the line, people often buy into an ICO.

By their very nature, ICOs are highly risky. Moreover, these kinds of investments have been riddled with fraud. Just in 2018, a scam ICO called Giza was reported by CNBC. It was a fake startup that ran off with $2 million in investor money, giving plenty of fuel to skeptics to continue to doubt the legitimacy of this industry.

It is important to keep in mind that everyone expects the startups to fail. The problem is the massive amount of cash that floods into these projects before they are ready — this is the primary cause for concern. When startups receive more fuel than they can keep up with, the resulting conflagration ultimately consumes both the company and the founders, which is not helpful to the investors in return.

The conflagrations are, unfortunately, a global phenomenon. In 2017 alone, dead ICOs and scams raised $1 billion, and nearly 300 startups had been marked as questionable. The lock-ups and pricing scams within the ICO market are using greed rather than rational thinking, and are hurting the industry more than helping it. In the end, it is crucial to invest only what you can afford to lose and expect any token that you invest in to fail. Then if it succeeds, you will be pleasantly surprised, and if it fails, you will avoid devastation.

Even Bitcoin, the biggest cryptocurrency by market capitalization or value, has had a tough year.

Although it hit a record high of nearly $20,000 last year, it has since decreased by nearly 70%, according to data from CoinDesk. While Bitcoin is still among the stronger of coins, many others have not been as fortunate. To note are five of the greatest failures in cryptocurrency history thus far.

THE BIGGEST CRYPTO TOKEN FAILURES

SPACEBIT

SpaceBit has long held the status of one of the most ambitious cryptocurrency projects thus far. And perhaps rightly so, as this is the company that wanted to launch several “nano-satellites” into orbit to provide a globally-accessible blockchain, which would be used for the storage of Bitcoin as well as helping unbanked regions access financial services. This announcement attracted much attention and enthusiasm from the public, gaining massive support behind them. However, the project ultimately disappeared. There was never any prototype or proof-of-concept, and eventually, all talk about SpaceBIT faded out completely. Supposedly the team behind SpaceBIT is now completely focused on a new project called BlockVerify, so SpaceBIT has been put on the shelf for good.

GEMS

Originally branded as “Gems” but now named “GetGems,” this was a social networking platform that uses cryptocurrency to pay members that view advertisements within the app. Having made grand claims in 2014 about disrupting social media, the result was somewhat disappointing with an underwhelmingly low crowdsale that year. Since then, GetGems has been overtaken by competitors, but they are still running; they have seen the most success in the country of Uzbekistan, ranking in 63rd place among apps.

DOGECOIN

Although this cryptocurrency began as a joke, it quickly evolved into a success with a passionate community behind it that became known for donating to charity with DOGE. After a successful streak, the Dogecoin collapsed. To make matters worse, founder Alex Green had disappeared with everyone’s money, shutting down the exchange. This led to the crashing of DOGE and disbandment of its community.

PAYCOIN

Launched in 2014, PayCoin grew to be one of the largest cryptocurrencies worldwide by market capitalization. The coin’s white paper presented a vision for new variations of blockchain technology that would produce a new breed of cryptocurrency. However, it quickly became evident that the coin would not live up to this vision when its founder converted PayCoin into a generic altcoin clone, which made it easier to push onto the market faster. As it lacked follow-through, people ultimately lost faith in the coin. By 2015, GAW shut down entirely and faced a federal investigation, with its founder fleeing the United States.

DAO

Taking first place in cryptocurrency failure is the Decentralized Autonomous Organization (DAO), an Ethereum-based coin. While its beginnings were met with great enthusiasm, including large purchases of the token, one incident had changed the entire course of this currency transactions. When an attacker exploited a vulnerability in the DAO smart contract, this led to a loss of more than $50 million. After information about the attack became well known, the token became abandoned by traders, throwing it into a downward spiral.

FINAL THOUGHTS

There has been intense pressure and skepticism placed on the crypto world, perpetuated by consistent news of novel scams or unsuccessful coins. However, optimism for the industry remains strong. Proponents of crypto expect regulators to learn to be more favorable towards the field, which could boost participation in the market. Similarly, there is a lot of optimism for the future of ICOs as an alternative to initial public offerings and venture capital funding. It is true that many coins have not survived, but there are also many coins that have. Every impactful innovation has its trials and tribulations, but that does not mean that it cannot evolve into a success that improves the way we live our lives.

Well into the second half of 2018 and it’s been a white-knuckle roller coaster ride for most. With Ether shedding 44 percent of its value in just two weeks and the media speaking of a Bitcoin bubble, is it possible to lose faith in crypto but remain bullish on blockchain? Apparently; if continued corporate statements like the UBS blockchain endorsement are anything to go by. But can you really separate cryptocurrency and blockchain?

UBS Bullish on Blockchain, Bearish on Bitcoin

CEO of Swiss investment banking giant UBS, Sergio Ermotti, came out with a bold claim recently. He said that blockchain was “almost a must” for business. UBS blockchain support is nothing new, however. Neither is their stance that cryptocurrencies are risky and will probably never become mainstream currencies.

UBS CEO Sergio Ermotti

Yet, when it comes to blockchain, UBS changes their point of view. The bank believes that blockchain technology can help companies become more efficient and reduce their operating costs across the board, from healthcare to finance. This implies a separation between cryptocurrencies and the technology that they run on.

But is it possible to separate the two? Furthermore, since the original vision of Satoshi was to send peer-to-peer electronic payments without the need for a middleman, UBS blockchain support could be misplaced.

Disrupt or Be Disrupted

“While we are doubtful cryptocurrencies will ever become a mainstream means of exchange, the underlying technology, blockchain, is likely to have a significant impact in industries ranging from finance to manufacturing, health care, and utilities,” UBS wrote in October of 2017.

So, what about cutting out the middleman? The centralized authority taking its fees? UBS blockchain research does acknowledge a certain level of risk, although they limit this to technological shortcomings and an uncertainty as to which application will benefit the industry most. They fail to mention whether digital currencies will threaten fiat ones, or if central authorities will be cut out of the loop.

In fact, within the financial sector, UBS predicts that blockchain technology will have irreversible and positive effects. And UBS blockchain support doesn’t stop at words. The bank is also investing in research into distributed ledgers and smart contracts in its business model.

UBS currently holds a number of blockchain patents. Yet, despite Ermotti’s bullish stance, their blockchain activities are dwarfed by other large banks and credit card companies. The list includes American Express, BBVA, Mizuho Financial Group, Goldman Sachs, BNP, and Bank of America (who’s buying up blockchain patents like they’re expecting a war). Is this a bid to disrupt or be disrupted? Or a defensive maneuver to protect themselves against blockchain innovation?

Blockchain and Bitcoin Are One and the Same

Plenty of people criticize Ermotti’s point of view, seeing it as a convenient way of taking a politically acceptable view and a safe position. Leaving the door open without scaring away existing clients. Others believe that more than just convenient, it misses the point completely. After all, blockchain and cryptocurrency are one and the same.

Consider the Bitcoin network for a moment. The way it was created requires miners to believe that the value of the Bitcoin they are rewarded will increase over time (or at least, not decrease in value). Otherwise, there is no incentive or rational reason to invest in expensive mining equipment, electricity, and time.

Bitcoin Mining Equipment

So, for those like UBS that are skeptical on Bitcoin, but busy singing the praises of blockchain, they may not fully understand. In an interview with Malta’s Steve Tendon, a member of the country’s Blockchain Taskforce and author of Malta’s National Blockchain Strategy, he expressed his concern with viewpoints such as the UBS blockchain one.

He argued that many regulators and institutions tried to draw a distinction between blockchain and cryptocurrencies, viewing crypto as a bad thing because of its criminal associations and scams, but blockchain as a positive technology with infinite possibilities.

“There is no way you can have a smart contract platform that is as sophisticated as the one that Ethereum has implemented today (but there will be others in the future) unless you also have a cryptocurrency that is being used to “pay” for the computation. So the distinction between cryptocurrency and blockchains are really artificial: they are just two aspects of the same coin,” he said.

Final Thoughts

Ermotti and the UBS team may be making headlines with their views on the transformative technology. Calling blockchain “crucial and disruptive” is all well and good. But frowning on Bitcoin at the same time may just be missing a trick.